Business in Africa: Booming, but trade barriers still high

The global financial crisis hasn’t slowed the expanding role of business in Africa or the newfound passion for market expansion among Africans and foreign investors. Now its time to get rid of the trade barriers between countries.

ByG. Pascal Zachary, Guest bloggerAugust 2, 2010

GOING BIG INTO AFRICA: Bharti Airtel International CEO Manoj Kohli spoke in Lusaka, Zambia in late June. India's Bharti Airtel will spend $150 million to improve its network in Zambia, as the mobile-phone operator challenges MTN Group for dominance in fast-growing Africa.

Business in Africa is dynamic, growing, socially relevant, and historically peaking. Never in history has the sub-Saharan been home to so many diverse enterprises.

The great African independence era came during the high-water mark, globally, of state-controlled economies. In recent decades, market-oriented approaches took longer to take root in Africa than perhaps anywhere else in the world.

Now that Europe and the US are rediscovering the role of the state in the economy – and because of the financial crisis and over indebtedness – the reputation of the private-sector is declining and fewer people today view business as a solution to urgent problems than they once did.

In Africa, the state remains a central economic actor, but the global crisis hasn’t slowed the expanding role of business and the newfound passion for business profit and market expansion among Africans and foreign investors in the region.

The media, the international foreign-assistance community and the official diplomatic community remain largely blind to the exciting business developments in Africa.

That blindness is only partly accidental; the official “aid” community, including the media that often acts on its behalf by providing gloomy articles about Africa’s prospects, often appears to emphasize the bad over the good in the region, which means ignoring or undercutting reports of business prospects. And so, for me, I’m not surprised at the scant international attention being given a meeting of Africa’s private-sector elite in Kampala that’s devoted to convincing governments to reduce barriers to trade within the sub-Saharan.

Incredibly, the barriers to trade between neighboring African countries are startingly high; in addition to various duties on goods, trucks themselves – the chief transporters of goods – are often subject to high (and random) fees and taxes. Remarkably, a trader in say Kampala can more cheaply and effeciently ship a load of stuff to Shanghai, China than to Lusaka, Zambia.

The evidence is overwhelming that the biggest upside for Africa lies in trade by, for, and with other Africans.

Such trade, which remains at shocking low levels when compared to trade within the world’s other major regions, will do more for poverty-reduction and peace-promotion than anything else. That neither the diplomatic nor the humanitarian communities understand the significance of trade within Africa, between Africans, speaks volumes about the dysfunctionality of the role given the sub-Saharan in the world community.

If the world must experience an “enough moment” about political violence and human-rights violations in Africa, perhaps we can also say enough to the neglect across national borders within the sub-Saharan.

To be sure, the business boom in Africa demands close monitoring. Business takes short-cuts, and also spawns inequalities. Partly that’s because some businesses lavish attention on the rising upper-classes in Africa: monied elites who can afford Western-style products and services. Even as business booms in Africa, inequality is also rising rapidly, as I document in a new essay of mine, “Haves and Have-nots (Africa Style),” in the fall issue of Milken Institute Review.

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